Magna International Inc. - OMEGA

them. As Tier 1 suppliers have successfully managed the challenges posed by modularization, automobile manufacturers have
begun sourcing increasingly larger, more complex modules (with increased content and features) as well as management or
integration of complete automotive interiors to their most capable suppliers.
Increasing Prevalence of Lower Volume “Niche” Vehicles Built Off High Volume Global Platforms
As automobile manufacturers attempt to broaden the range of vehicles they offer, differentiate their products from those of
their competitors, expand the number of market segments in which they compete, extend the life of their existing vehicle platforms,
respond to lifestyle trends and meet the tastes of consumers, they are increasingly introducing lower volume derivative or niche
vehicles. Niche vehicles are new vehicle models which are built off existing vehicle platforms, and usually consist of convertibles,
sports cars and/or all-wheel/four-wheel drive sports utility or cross utility vehicles. Automobile manufacturers are also
increasingly “refreshing” existing models during the program life and developing model variants with factory-installed styling
packages. This trend towards niche vehicles provides certain Tier 1 suppliers who have capabilities which resemble the
capabilities of automobile manufacturers with increased opportunities to provide complete vehicle design, engineering and/or
assembly services.
Growth of North American Subsidiaries of Foreign-Based Automobile Manufacturers
North American subsidiaries of foreign-based (primarily Japanese and European) automobile manufacturers represented
approximately 26% of aggregate North American car and light truck production in calendar 2001, as compared to approximately
25% in calendar 2000. Over the next several years these automobile manufacturers are expected to continue to increase their North
American production volumes as their market share increases by expanding existing assembly facilities and building new assembly
facilities. A number of factors, including the improving quality and cost effectiveness of North American auto parts suppliers,
currency fluctuations, loosening of the traditional Japanese “keiretsu” supplier relationships and the North American Free Trade
Agreement are expected to result in these automobile manufacturers relying on increased out-sourcing to increase the North
American content of their vehicles. Accordingly, these automobile manufacturers represent significant growth potential for North
American automotive suppliers.
OVERVIEW OF THE HORSE RACING INDUSTRY
The horse racing industry is a highly fragmented industry with relatively few high-quality racetracks and relatively few
operators owning more than two facilities. Over the last 20 years, live attendance at horse racetracks in the United States has
declined substantially due to a number of factors, including the growth in off-track wagering; increased competition from other
forms of gaming and leisure entertainment; the attrition of the racing industry’s traditional customer base; the lack of, or
deterioration in, the quality of live racing events at many racetracks; and the inability of racetrack operators to broaden the appeal
of wagering on horse racing. Declining live attendance has resulted in an overall decline in the amount of money wagered on live
horse racing, which has exacerbated the problem of producing high-quality live wagering events and in developing entertaining
racetrack facilities.
In the early 1990's, the introduction of off-track and inter-track wagering became more prevalent and reversed the decline in
the total amount of dollars wagered on horse racing. The rise of off-track and inter-track wagering has resulted in a significant
increase in total industry revenues, and the creation of larger pools of wagers on horse races at certain racetracks. This has more
than offset the decline in live on-track wagering due to declining live attendance. The larger pools of wagers have produced larger
purses, which have resulted in higher-quality racing events and an increased interest in horse racing and pari mutuel wagering.
As a result, the financial performance of many of the premier racetracks in the United States has improved.
OUR AUTOMOTIVE BUSINESS STRATEGY
In order to capitalize on the foregoing trends in the automotive industry, our automotive business strategy is to achieve and
maintain a leading global position with all major automobile manufacturers in North America and Europe as a full service supplier
of metal body and structural systems, interior, exterior, engine and powertrain modules, with vehicle engineering and assembly,
program management and systems integration capabilities. Some of the specific elements to achieve this general strategy are set
forth below.
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